AMCON Distributing Company Faces Profit Decline Amid Rising Costs
Shares of AMCON Distributing Company (DIT) have dropped 4.6% after the company’s fiscal first quarter earnings report for the quarter ended December 31, 2024. In contrast, the S&P 500 index saw a modest gain of 0.9% during the same period. Over the last month, AMCON’s stock has fallen 11.5%, compared to the S&P 500’s 0.4% growth.
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Earnings Overview
For the first fiscal quarter ending December 31, 2024, AMCON reported earnings per share (EPS) of 57 cents, a significant drop from $1.78 a year ago.
Sales and Profit Figures
The company achieved net sales of $711.3 million, reflecting a 10.3% increase from $645 million during the same period last year. Gross profit rose by 8.3%, reaching $46.9 million, up from $43.3 million.
However, net income available to common shareholders plummeted by 67.5% to $0.4 million. This stark decline was primarily attributable to higher interest expenses and escalating operating costs.
Performance Insights
AMCON Distributing Company Price, Consensus, and EPS Surprise Chart | AMCON Distributing Company Quote
Factors Behind Revenue Growth
AMCON’s revenue growth was fueled mainly by increased sales volumes across a range of products, including beverages, tobacco, and food services. Excise taxes included in sales rose to $143.4 million, up from $138.1 million a year earlier.
Cost Pressures and Margins
Despite the boost in gross profit, the gross margin saw a slight decline from 6.7% to 6.6%. The rise in operating expenses, which jumped by 9.5% to $43.2 million, also impacted overall profitability. Interest expenses rose significantly by 23.1% to $2.9 million due to higher borrowing costs.
Current Financial Position
As of December 31, 2024, AMCON reported shareholders’ equity of $112.4 million, showing a modest increase from $111.7 million in September 2024. However, cash availability decreased to $0.5 million from $0.7 million. Additionally, inventory levels surged to $174.5 million from $144.3 million, indicating a need for more working capital.
Management Strategies
AMCON’s management reiterated its commitment to assisting its retail partners with enhanced logistics and innovative food service solutions. CEO Christopher H. Atayan noted the focus on customer needs, especially during difficult weather, to ensure timely product delivery.
Andrew C. Plummer, president and COO, stressed the crucial role of Henry’s Foods, a subsidiary that specializes in proprietary food service programs. The company has improved its advertising and electronic display initiatives to give customers an edge in the Quick Service Restaurant market.
Acquisition and Expansion Efforts
AMCON successfully acquired the assets of Arrowrock Supply, a distributor based in Boise, Idaho, which is expected to enhance its presence in the Intermountain Region. Furthermore, AMCON is developing a new 250,000-square-foot distribution center in Colorado City, CO, to support its growth initiatives.
Financial Health Initiatives
The company remains focused on managing liquidity and optimizing its balance sheet. Notably, borrowing under AMCON’s revolving credit facilities has increased sharply to $165.9 million, up from $121.3 million at the end of September 2024, highlighting the company’s reliance on credit for operational and capital expenditures.
Investment Insight
Zacks Investment Research has identified several promising stocks, with one standout expected to double in value in the coming months. This company targets millennial and Gen Z consumers, achieving nearly $1 billion in revenue last quarter. Recent market fluctuations suggest now may be an opportune time for investors.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
